This afternoon, barely two months after B and I started looking, we closed on our new home! I could go on and on about how excited we are (very!) and how crazy it seems that it’s really ours (totally!) and how I-just-can’t-wait-to-move-in-this-very-second!! But I feel I couldn’t really do it without using an obscene amount of exclamation points… and so that post may have to wait.
While contemplating all of the excitement/craziness this morning I thought of how far we’ve come in two months, how steep the learning curve on this type of thing is, and thought about some of the things that really drove me nuts about the process. By and large, the thing that drove me absolutely bat-shit-crazy was that I never really felt like I could get a grasp on the process. No one could give me the WHOLE picture. It was always “well I’ll help you with x… then you’ll go on to the next step and I don’t really know what happens there.” I’m a big picture person and I can’t handle that. I mean.. I did. And I got through it. But there is just no reason it had to be so confusing.
One of the problems, I think, is that buying a house is something that people do on average maybe once every ten years, max. They’re confused when they do it, and its stressful, and within 6 months it’s really hard to remember what all happened. I just closed today and I’m already fuzzy on some of the details. So, I thought I’d write down the path we took, from searching to closing. I’m sure there’s a thousand ways this can be done… but here is how WE did it.
1) We started doing some online research about neighborhoods/house types/pricing so that we would have a good idea what was out there and what we might want.
2) Make a rough budget to figure out how much of a down payment we’d have, and how much we could comfortably afford per month. Use an online mortgage calculator to plug in those variables and figure out how much house we can afford
– Note: Unfortunately there are monthly payments you’ll be making as part of your “mortgage” payment that are in addition to principle + interest, and these can be really hard to estimate. These include taxes, home owners insurance, home owners associate fees (if any), and private mortgage insurance (if any). We just used the suggested amounts for these and then kind of “rounded down” on what we could afford.
3) Figure out what area(s) you can afford to buy in and what type of house you’re looking for. I then started emailing sales agents for new home builders and finding houses online that we’d want to see. I just googled “columbus ohio real estate” and when I found houses I liked, I clicked “request a showing.” You could also ask for recommendations on realtors, but no one we knew in columbus had a realtor they were happy with so I just asked google.
4) Get pre-approved for a loan. We went to lendingtree.com and filled out their application for quotes. We got “pre-qualified” for three different companies. We wanted to get a pre-approval letter (which means that as long as we didn’t lie to the company, they will loan us the money they promised to) so that if we found a house we loved we could show the seller we were serious and could move quickly. To get a pre-approval letter, contact one of the companies that gives you a pre-qualification and tell them what you’re looking for and what you want.
5) Once you find a house, you’ll make an offer. This was a little different for us because we bought a “spec house” which is a house that a builder builds without a buyer in mind. So, there was really no bidding. (You may have to put down “good faith money” which shows the seller you’re serious. We had to put down a $500 deposit. Both are applied to the amount due at closing)
6) Once we had an agreement to buy, we had to sign a sales contract with the sales agent. Basically, the contract said that we had 7 days to apply for financing for the house and 30 days to have an inspection done on the house if we wanted to. If something went wrong in those 30 days, we could back out of the deal.
– Note: because we bought a new house, it has a 1 year warranty for everything, 10 year structural warranty, and a 30 year foundation warranty. Because of that an inspection was unnecessary. But, if you’re buying a house that isn’t brand-new you DEFINITELY need an inspection
7) paperwork hell. Apply for a loan from the company that offers you the best deal and start gathering a ridiculous amount of paperwork. Tax returns for several years, bank documents, retirement documents, on and on. Seriously… pretty much everything financial for the last two years…. you need it. Keep your shit together now and save yourself a headache. Also– decide which type of loan you want! Conventional or FHA.
8 ) Once you get approved for your financing, its time to find homeowners insurance. Probably whoever does your car insurance can do your homeowners too. We shopped both our agents and went with the better quote.
9) You’ll get something called a Good Faith Estimate that will estimate for you how much you’ll owe at closing. There are three main categories of costs due at closing: down payment, closing costs, and prepaids. Down payment is obvious. Closing costs are huge and honestly there’s way too many of them to try to list. It is basically stuff like lending fees, recording fees, etc. You can often negotiate to get these paid by the seller. Our seller paid ours. Prepaids are things that you have to pay ahead like real estate taxes, homeowners insurance, home owners association, and private mortgage insurance. These amounts are going to be drastically different depending on what kind of house you’re looking at, but for us the prepaids were about $1800.
10) A few days before you close you’ll get a call with the total amount due at closing and you have to go get a certified check from the bank. This is basically just to make sure that the check will clear when you give it to them so they’ll give you the keys.
11) Closing! Sit down for an hour with your beloved and sign your life away 2342 times. Just kidding. Kind of. Really… everyone made closing sound so bad that I think I was almost pleasantly surprised by how painless it was. There is a lot of paperwork but almost all of it is boiler-plate, and you really just go through and sign your name to all of it.
So, thats it! It really is a confusing process but coming out the other end helps me put it all in perspective. For all the frustration I’ve felt in the last two months, it really did all melt away when I used the key to enter our brand new home tonight. Every buying experience is different, but hopefully seeing our whole process will help someone with at least an example of the way things can go.